September 23, 2013 / 3:54 PM / in 4 years

Chile's CorpGroup to sell insurance units for $165 million

SANTIAGO, Sept 23 (Reuters) - Chile’s CorpGroup, owner of bank CorpBanca, said on Monday that it would sell its insurance units to local company Inversiones La Construccion for around $165 million.

Chilean billionaire Alvaro Saieh owns both CorpGroup and SMU, which is strapped for cash after an accounting error led it to breach debt covenants.

Last month, Moody’s Investors Service placed CorpBanca’s ratings on review for downgrade.

At the time, the rating agency said that while the direct financial connections between CorpBanca and SMU were limited in terms of loans and funding, “the companies’ shared majority shareholder and the overall tighter market conditions have led to concerns regarding increasing funding costs that are likely to affect the bank’s profitability.”

Monday’s deal calls for Inversiones La Construccion , a pension fund, life insurance, health insurance and private healthcare services operator, to purchase a 67 percent stake in CorpGroup Vida Chile, which in turn controls Compania de Seguros Corpvida y Compania de Seguros Corpseguros.

In midday trading, Inversiones La Construccion’s shares were up 5.2 percent, and CorpBanca rose 3.1 percent.

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